Philippines has an exhaustive decentralisation code providing local governments with a high degree of discretion. But the concurrent upward and downward accountability mechanisms are weak resulting in inefficiency and ineffectiveness of local governments. We employ a diagnostic framework to analyse local governments' discretion and accountability in political, administrative and fiscal domains. We find that the entrenched culture of power accumulation and patronage—within which decentralisation operates—has resulted in elite capture at the local level. This along with lack of capacity at national and local levels has caused serious impediments in downward accountability of local governments. Copyright © 2010 John Wiley & Sons, Ltd.